- Pharma and biotech giant Bayer has increased its investment in low-carbon oilseed producer CoverCress to take a 65% majority stake.
- The remaining 35% of CoverCress will remain with agribusiness Bunge and energy company Chevron U.S.A., according to a shareholders agreement signed by the two companies and Bayer.
- The deal will enable CoverCress to further commercialize its namesake winter oilseed product into a cover crop that can provide lower carbon fuel feedstock to the renewable fuel industry while also bringing farmers another source of revenue during the growing season.
Why it matters:
The deal marks an exit for CoverCress’s founders and early investors, who include Fulcrum Global Capital, Prelude Ventures and St. Louis Arch Angels. REG Ventures — the subsidiary of US biodiesel producer Renewable Energy Group (REG) that’s now wholly owned by Chevron, and Prolog Ventures also participated. It’s unclear what the valuation was — the company’s last Series B1 round closed on $8 million.
While cover cropping is still relatively rare in the US, it’s on the rise and the government wants to double cover crop acreage to 30 million acres by 2030 under a new Department of Agriculture (USDA) conservation program. Given there’s about 250 million acres of cropland in the US, there’s still a long way to grow from there.
The benefits of planting CoverCress go beyond the well-documented ability to improve soil health and reduce erosion by keeping land planted in the off-season; CoverCress also holds the potential to be a cash crop for farmers.
Derived from pennycress, a plant native to North America, and thanks to some CRISPR-based gene-editing, CoverCress has multiple uses. Oil extracted from the plant’s grain can be made into a renewable diesel with a lower carbon-intensity score; it can also be used as high-protein meal for animal feed. Both uses can bring additional revenue to farmers’ coffers while also providing carbon sequestration benefits.
Bayer, Bunge, and Chevron have all previously invested CoverCress and helped the company get “buy-in” from the entire “farm-to-fuel” supply chain. Early investment from Monsanto Growth Ventures (now part of Leaps by Bayer) has enabled more development for CoverCress upstream. Earlier this year, CoverCress and Bunge signed an agreement wherein the former will supply the latter with grain for crushing. Once oil is available from that crush, it will be used as a feedstock by Chevron to produce renewable diesel. The meal will go towards feeding livestock.
The collaboration between all three companies stands to give CoverCress the resources needed to further develop and commercialize its product. The timing of the deal couldn’t be more appropriate. Recent heatwaves in parts of the world along with calls for greater food security have increased the urgency for new crop solutions.